The annual position increase was about 750 billion yuan, the position at the end of the year reached 4 trillion yuan, the maximum monthly turnover exceeded 1 trillion yuan, and the number of investors entering the market exceeded 1000... On January 10, the "annual bill" of overseas institutions investing in Chinese bonds in 2021 was announced.
A series of figures show that overseas institutions' investment in domestic bonds is sustainable and stable, and RMB assets, including bonds, show a strong attraction to global investors.
Experts said that the long-term stable development of China's economy and the continuous improvement of financial openness provide a solid foundation for attracting foreign capital inflows. In the future, there is great room to improve the level of foreign capital participation. The general trend of foreign capital increasing its holdings of Chinese bonds will not change and the pace will be more stable.
deeper participation
On January 10, the briefing on the December 2021 interbank bond market for investment by overseas institutions released by the Shanghai headquarters of the people's Bank of China showed that by the end of 2021, overseas institutions held 4 trillion yuan of interbank bond market, accounting for about 3.5% of the total custody of the interbank bond market, and both data reached a new high. Compared with the end of 2020, the bond positions of overseas institutions increased by about 750 billion yuan, and the proportion of positions increased by about 0.3%.
It is estimated that in December 2021, overseas institutions increased their holdings of interbank market bonds by about 70 billion yuan, the ninth consecutive month. In addition, according to the data released by the Central Clearing Company, in December 2021, the scale of bonds entrusted by overseas institutions in the institution increased by 78.7 billion yuan, which has increased for 37 consecutive months since December 2018.
International investors have increasingly become an active force in China's bond market. In December 2021, the cash bond trading volume of overseas institutions was about 934.5 billion yuan, and more than 1.1 trillion yuan in July.
The briefing also shows that more international investors are entering China's bond market. According to the legal entity, by the end of 2021, a total of 1016 overseas institutions had entered the market, with 111 newly added in that year. The settlement agency model and the "bond link" model provide international investors with diversified market entry options.
The scale of investment is larger, more institutions are admitted, and transactions are more active... Multi-dimensional data show that the degree of international investors' participation in China's bond market is deepening.
"loyal buyers" more
Among all kinds of bonds, foreign institutional investors favor treasury bonds. According to the above briefing, as of the end of 2021, the main custody securities of overseas institutions were treasury bonds, with a custody amount of 2.45 trillion yuan, an increase of about 570 billion yuan over the end of 2020, and the proportion of treasury bond positions increased from 57.7% to 61.3%. In addition, by the end of 2021, overseas institutions held 1.09 trillion yuan of policy financial bonds, an increase of about 165.2 billion yuan over the end of 2020.
Wang Chunying, deputy director of the State Administration of foreign exchange, once introduced that since the outbreak of covid-19 pneumonia, China's bond assets with high credit rating such as government bonds and policy financial bonds have gradually been favored by global investors.
The participation of more foreign central bank institutions explains to some extent why interest rate products such as treasury bonds are sought after by international investors. By the end of November 2021, 76 foreign central bank institutions had entered the inter-bank bond market, an increase of 5 compared with the end of December 2020.
Insiders said that at present, foreign central banks and sovereign wealth fund institutions account for a large proportion of foreign investors in the bond market, and these institutions tend to invest in the long term. In terms of investment targets, bonds issued by government departments are mainly selected to reflect the demands of overseas investors for diversified asset allocation and seeking stable income.
the pace of increasing holdings is more stable
Why do overseas institutions favor RMB bonds? In the final analysis, it is the long-term and stable development of China's economy and the steady expansion of China's financial opening-up that enhance the attractiveness of RMB assets.
Wang Chunying said that foreign investors continue to increase their holdings of RMB bonds, which reflects the achievements of China's bond market opening up and investors' confidence in China's economic development prospects.
Zhu Haibin, chief economist of JPMorgan Chase China, believes that China's strong economic performance provides a stable internal basis for foreign investors to increase their holdings of domestic bonds. At the same time, the high yield of Chinese bonds and the outstanding resilience of RMB exchange rate all enhance the attractiveness of Chinese bonds.
The enhanced hedging attribute of RMB assets constitutes a new "bonus item". Yao Wei, chief economist of France's Industrial Bank Co.Ltd(601166) Asia Pacific region and China, said that the correlation between China's bond market and overseas markets is low. For the consideration of dispersing asset allocation risk, international investors\' interest in investing in China's bonds is increasing.
Looking forward to the future, the momentum of international investors increasing their holdings of Chinese bonds is expected to continue. Wang Chunying said that China's bond market has a large scale and good liquidity, but the proportion of foreign capital is still low. There is a lot of room for foreign capital to allocate RMB bonds in the future.
With the increase of holding scale and the change of internal and external environment, the additional allocation of foreign capital will be more stable in the future. Wang Chunying previously pointed out that the rapid growth of the net increase in foreign capital holdings in the first half of 2021 was realized under the background of the epidemic, the stable recovery of China's economy and ultra loose external liquidity, which is a special performance in a special period. With the recovery of the global economy and the return of external liquidity and interest rates to normal, the purchase of bonds by foreign investors will return to the normal before the epidemic, and the pace of increasing foreign holdings of domestic bonds will be more stable.
(source: China Securities Journal)
